AT&T Resumes Rollout for Cable TV

AT&T's push into cable TV is ramping back up after a pause prompted by glitches that the company says have been resolved with key network software upgrades.

Over the past two weeks, AT&T resumed direct mailings and distribution of promotional "door hangers" for the new U-verse television service, the first marketing activities since those efforts were suspended starting in October.

AT&T also plans to announce on Wednesday it is introducing U-verse in parts of Milwaukee and Racine, Wis., immediately, followed by the Dallas-Fort Worth market in early March and then Kansas City later that month. Those four launches, bringing the total to 15 markets, are the first since nine cities were added at the end of December.

U-verse, delivered over a high-speed Internet connection, is crucial to AT&T's strategy to fend off cable companies now selling telephone service. The San Antonio-based company aims to keep and win customers with next-generation features melding TV sets, cell phones and computers.

To provide such robust capabilities over the plain copper phone wires connected to most homes, AT&T is using relatively unproven technology known as IPTV, short for Internet Protocol TV. That approach has enabled AT&T to spend only a fraction of the $23 billion Verizon Communications is investing to rewire half its local phone network with fiber-optic lines all the way to each home.

But because the software, provided largely by Microsoft, has never been deployed on such a large scale, assorted glitches have forced AT&T to repeatedly delay and scale back the service rollout even though the required network upgrade remains on pace.

"We have had our fits and starts, but right now we feel we're in a pretty good place," John Stankey, AT&T's group president for operations support, said in an interview. The deployment of the latest software for the system was completed in early February, he said, stressing that the upgrade addressed many "small annoyances" rather than any one big problem.

The systems are now operating smoothly enough that, "We're ready to play the game and put numbers on the board," he said.

Micosoft Pleased with Progress

Microsoft, which has encountered multiple bumps in its early dominance of the IPTV software market, is "very pleased with the progress we've made with AT&T on its software platform" to enable the wider-scale rollout, said spokesman Jim Brady. "These challenges are absolutely behind us."

The renewed marketing efforts also include a new tactic: door-to-door sales calls, with agents deployed in every neighborhood, began earlier this month.

With the return to more active marketing, sales volume has already risen 138% in February as compared with December. Stankey projected "that number will probably be three times that level by the end of March based on the last few weeks of work."

With all the delays, there are now roughly 7,000 U-verse subscribers, up from 3,000 at the close of 2006, even though AT&T's network was U-verse-ready in areas with 2.2 million homes at year's end. By contrast, Verizon had signed up 217,000 homes for FiOS TV by the end of last year, and cable companies lured away hundreds of thousands of AT&T's phone customers during 2006.

A full U-verse launch was originally slated to begin in late 2005. It took until mid-2006 to bring the service to just one market, the company's hometown of San Antonio, and even then with availability to just 5,000 homes and without promised capabilities such as high-definition TV.

The company also backtracked multiple times on a pledge to introduce the service in 15 to 20 markets during 2006, first saying those launches wouldn't be market-wide, then trimming the goal to 15 markets. The second launch - Houston - came in November, but it took until three days before the end of 2006 to introduce U-verse to another nine markets, for a year-end total of only 11.

Possibly owing to lessons learned about making predictions, AT&T hasn't made any public projections for the number of markets or customers it expects to be served by U-verse by the end of 2007 - though the company does say its network upgrade will cover 8 million homes by then.

Stankey said the company expects at least one U-verse launch this year within the nine-state region served by BellSouth, which AT&T acquired at the end of 2006.

Despite the recent system improvements, AT&T is sticking with its phased approach to introducing and expanding the U-verse service area rather than launching across entire markets.

Stankey said the recent software upgrades resolved assorted glitches such as stabilizing the picture quality of high-definition channels to avoid spurts of "tiling" or pixilation. Another problem addressed was that the audio would be louder on one channel than another.

"It's not any one big thing. It's fixing a large number of small annoyances," said Stankey, estimating he was working on 18 to 20 such issues over the past few months. "None in themselves were cataclysmic."